Of the 21 units at the University of Washington, the humanities and, to a lesser degree, the social sciences are the only ones that generate more tuition income than 100 percent of their total expenditure. Cary Nelson, president of the American Association of University Professors, recently cited a University of Illinois report showing that a large humanities department like English produces a substantial net profit, whereas units such as engineering and agriculture run at a loss. The widely respected Delaware Study of Instructional Costs and Productivity shows the same pattern.

Because that evidence runs up against the widespread myth that other units and departments subsidize the humanities, and up against such well-entrenched forces within the university, it is regularly ignored or even suppressed. In the 1990s, UCLA invested huge amounts of money setting up Responsibility Centered Management, an accounting system eventually used at many universities to evaluate all the real costs of different units and the revenue they actually produce. The goal was to make budgeting fair and transparent. However, according to administrators then prominently involved in the process, when the initial run of those intricate spreadsheets showed that the College of Letters and Science was the most efficient user and producer of money, and the health sciences were far less efficient, RCM was abandoned.

Comments

Probably worth reading what Stanley Fish (among others) has to say about Watson’s conclusions from that UCLA Today article.

“The calculations Watson and Newfield come up with might make sense in a small private liberal arts college with high tuition ($45,000 as opposed to $4,500) and relatively inexpensive facilities, or in a bygone era when state support was at 70 percent or 80 percent (it’s now as low as 7 percent). If the state is paying most of the bills as it once did, tuition can be low because it is not being asked to carry the burden of the operation; but today, when tuition is still low (relative to costs) and the state is walking away from its obligations ever faster and expenses climb ever higher, the math won’t work. No matter how popular humanities courses may be, they don’t pay their way because the revenue they generate in inadequate tuition dollars is only a portion of what is required. (Magazines sometimes fold even though their circulation is quite high; the advertising revenues don’t meet the production costs, so the more units sold, the more money lost.)”

Yeah, these studies are based on the fiction that all credit hours are equivalent. So students pay the same tuition no matter what classes they are taking. So sure, humanities classes are, on average, cheaper to run than sciences. But the tuition hour price is created to cover both cheap humanities and expensive lab classes. The humanities aren’t “making” money. They simply cost less than the averaged out price of the tuition hour.

It’s like saying that the filet mignon at a by-the-pound buffet is losing money compared to the white rice. No: the price per pound is determined by taking into account the high price of the meat versus the low price of the rice.

You’re not thinking about the issue properly. In fact, you’re using an entirely wrong price theory - price isn’t set on costs, but on the intersection of supply and demand.

If the buffet can maintain it’s price and reduce the amount of meat consumed (perhaps by making the rice somehow more appealing or making meatballs with meat and rice), it will be a more profitable business.

Empirically, we can see that the top tier of private liberal arts colleges are generally in superlative financial states. That they succeed in encouraging students to take relatively more cheap humanities or social science courses while still charging the same tuition might well be a major factor behind this (there may, of course, be other factors as well).

It’s essentially like producing a car: charging the same price while reducing your cost structure is a major route to success.

Thus, a university which reduces the availability of less expensive humanities or social science courses will force or encourage students to take more expensive classes, increasing rather than reducing their own cost structure.

SUNY Albany instead of cutting classics should be trying to make more students study more classics. Every classics class they take is cheaper than them taking another science or business course. The students may still want business or science majors, but if SUNY Albany can encourage them to take more electives in classics, the better the operating margins are.

In fact, if I were running SUNY Albany, I would be trying to build a great French department, precisely because if I attract more French majors who still pay the full tuition, my cost structure will now be lower and my opex margin higher.

Fish is thinking about the issue wrongly. There is a finite amount of federal grant dollars available. The scientists compete for federal grant dollars. Those scientists who have a track record of getting federal grant dollars move to other universities who pay them more in various ways (more salary, more research assistants, more facilities, etc). Eventually, the marginal revenue these scientists bring in will equal the marginal costs that the scientists are demanding.

Some universities will be able to play that game and keep the marginal revenue higher than the increasing marginal costs. However, like any investment decision, most universities are going to be average in this (by definition). That means that, unless the university has superior skill in picking profitable scientists or superior skill in negotiating pay packages, the vast bulk of universities will tend to hire scientists whose marginal revenues roughly equal their marginal costs.

Since SUNY Albany has no demonstrated track record of superior skill in hiring profitable scientists or superior skill in negotiating pay packages, they will perform at best at the average.